UKLA proposes further widespread changes to its technical notes

The Financial Conduct Authority has published its Primary Market Bulletin no. 11, in which it provides a round-up of recent rule changes and announces a number of changes to the UKLA technical notes. Six new technical notes have been added, 11 existing ones amended and one note deleted, after earlier consultation. The UKLA is also proposing to add some new technical notes in respect of closed-ended investment funds and amend a number of other technical notes on a variety of topics, including sponsor conflicts of interest.

The Bulletin also explains how the changes to the FCA’s structure described in its 2015/2016 business plan will impact the primary market functions carried out by the UKLA.

Proposed changes

The changes relate to a variety of areas:

  • amending the technical note on sponsor conflicts of interest (UKLA/TN/701.2) to provide further guidance on the approach that sponsors should take to conflicts if they are asked to provide advice which comprises a sponsor service under the Listing Rules prior to or in the absence of any formal appointment as sponsor. The FCA expects sponsors to consider the Listing Rules on conflicts in such circumstances and to take reasonable steps to identify conflicts that could adversely affect its ability to perform its functions properly under LR8. The FCA does, however, recognise that sponsors may face practical challenges, especially if the matter is urgent or a sponsor service is provided out of hours and that, as a result, in certain circumstances less extensive checks may be carried out on a temporary basis. The FCA gives guidance on the types of check that may be appropriate. If limited checks are carried out, full conflicts checks should be performed as soon as practicable and the sponsor should cease to act if, as a result, it comes to the opinion that it cannot provide or continue to provide the sponsor service. The FCA also expects sponsors to ensure that relevant employees are appropriately trained to enable them to identify, escalate and manage conflicts of interest;
  • amending the procedural note on block listings (UKLA/PN/907.2) to clarify the application to closed-ended investment funds with premium management arrangements;
  • minor amendments to the notes on related party transactions (UKLA/TN/308.2 and UKLA/TN/309.2) to reflect the fact that since May 2014 an announcement is required for smaller related party transactions;
  • adding six new notes to clarify the application of certain rules in respect of closed-ended investment funds; and
  • deleting the notes on approval of circulars and circulars not requiring approval (UKLA/TN/206.1 and UKLA/TN/303.1) to reflect the changes to LR 13 taking effect on 1 April (only circulars relating to particular types of transaction need to be approved after this date).

Changes which have taken effect

The following changes to the technical notes have been made. These were originally proposed by the UKLA in Primary Market Bulletin Nos.8 and 9:

  • the addition of six new technical notes: Cancellation of listing or transfer between listing categories – requests to waive the 20 business day notice period (UKLA/TN/210.1); Share buybacks - novel/complex approaches and Premium Listing Principle 5 (UKLA/TN/310.1); Discounted share issues and standard of disclosures in circulars (UKLA/TN/311.1); Related party transactions by closed-ended investment funds – amendment of an existing investment management agreement to cover new money (UKLA/TN/404.1); Disclosure of 'lock-up' agreements (UKLA/TN/522.1); and Pro-forma financial information (UKLA/TN/633.1);
  • the amendment of eleven existing technical notes: Scientific research based companies (UKLA/TN/422.2); the Sponsor's role on working capital confirmations (UKLA/TN/704.2); Sponsor's obligations on financial position and prospects procedures (UKLA/TN/708.2); Restrictions on Transfer (UKLA/TN/101.2); Compliance with the Listing Principles and Premium Listing Principles (UKLA/TN/203.2); Equality of treatment - Premium Listing Principle 5 (UKLA/TN/207.2); Assessing and handling inside information (UKLA/TN/521.2); Risk factors (UKLA/TN/621.3); Ratification circulars (UKLA/TN/204.2); Transactions by persons discharging managerial responsibilities and their connected persons (UKLA/TN/540.2); and Hostile takeovers (UKLA/TN/305.2); and
  • the deletion of one existing technical note: Sponsors: Creation and maintenance of records (UKLA/TN/703.1).

The UKLA summarises the feedback received on its original proposals, and its response to that feedback in this bulletin. It had also proposed a new procedural note on UKLA decision making and individual guidance processes (UKLA/PN/908.2): it is now considering further changes to that note to reflect the UKLA’s new strategic approach.

Comments on the proposals are requested by 11 May 2015. The Primary Market Bulletin no. 11 is available here. The proposed changes to the Procedural and Technical notes can be viewed in full here. The changes that have already taken effect can be found here.